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Novartis Bets $8.7B on AveXis’s Gene Therapy for Spine Disease

A gene therapy for the rare disease spinal muscular atrophy could hit the U.S. market next year. If it does, the treatment will likely be sold by Novartis, not its developer, AveXis, thanks to a deal announced early this morning.

Novartis has agreed to buy AveXis (NASDAQ: AVXS) and its experimental SMA gene therapy AVXS-101 for $218 per share in cash, or $8.7 billion. The deal represents a whopping 88 percent premium to AveXis’s $119.60 closing price on April 6, and the price could jump higher, to $225 per share, if the deal doesn’t close by July 6. AveXis would have to pay Novartis $284 million if it gets a better proposal and kills the deal.

The buyout is a significant bet not only that Chicago-based AveXis’s gene therapy will come through in a clinical test this year, but that it will succeed commercially in spite of competition from an effective drug—something a gene therapy, a one-time, long-lasting treatment, has yet to do.

In its most severe form, spinal muscular atrophy, a rare genetic disease, can kill babies by the age of two. More moderate forms rob people of their ability to walk and function independently. There were no treatments for SMA up until December 2016, when the FDA approved Biogen’s (NASDAQ: BIIB) nusinersen (Spinraza). The drug, an RNA-based therapy administered a few times a year, for life, through a spinal infusion, was a medical breakthrough. It may slow the progression of multiple types of SMA.

Yet nusinersen, which generated $884 million worldwide for Biogen in fiscal 2017, has limitations. Neither the magnitude of nusinersen’s benefit, for instance, nor its long-term impact on patients, are clear. And it comes with a $750,000 first-year list price followed by a $375,000 price tag each year thereafter.

AveXis could soon provide competition with AVXS-101, which, unlike nusinersen, is a gene therapy that could provide long-lasting, if not permanent effects with a single treatment. Results from early testing of AVXS-101 have been eye-opening, and no major safety problems have emerged as of yet. Novartis is gambling, however, that those results will translate to STR1VE—and other ongoing tests of AVXS-101 in other subsets of people with the disease—and AVXS-101 will become a critical treatment option for SMA patients. Novartis expects to file for approval of AVXS-101 later this year and begin selling it in the U.S. in 2019. As of late February, five patients had been dosed with AVXS-101 in the STR1VE study, according to a press release.

Novartis is also betting that the recent alarm sounded by gene therapy pioneer James Wilson of the University of Pennsylvania over the use of the method to treat severe diseases such as SMA doesn’t apply to AVXS-101. Wilson called for close monitoring of patients receiving high doses of a certain type of gene therapy delivered into the bloodstream with the help of an adeno-associated virus (AAV), after seeing some troubling findings in animal tests. AveXis is among those testing such a gene therapy, though it has distanced itself from Wilson’s work. In a statement to Xconomy in January, chief medical officer Sukumar Nagendran said the UPenn studies used a different gene therapy delivery tool than AveXis, and that the data are “inconsistent” with high-dose AAV studies from AveXis and others. “The ‘process defines the product,’” Nagendran said in the statement. “Wilson’s manufacturing process is non-GMP”—a term that stands for industry-grade ‘good manufacturing practice’—“and is not the AveXis process.”